The FCC is proposing a rule change that could alter how Americans watch television forever.

That might be pushing it a little too much, but the FCC is proposing a change to a provision in the Cable Television Protection and Competition Act that requires cable companies to to provide unencrypted basic tier cable.

The rule change, obviously supported by cable companies, would enable the encryption of basic tier cable. This means that people who jack in and get free cable from local providers would be required to get a set-top box.

The rule change could make it so that people who previously relied upon free cable would be hit with service charges and the need to buy a set-top box. Public Knowledge has petitioned the FCC to at least allow a “transition period” and require cable companies to give low-income families free set-top boxes to ease them in to the new regulation.

That’s not the main issue though – Boxee would be hit hardest with this new rule. They recently offered a Live TV stick for their set-top box that allows users to jack into local stations. The company said that 40 percent of their users use the Live TV stick to stream local content. That alone makes Boxee the most compelling device for people who want to cut their cable. Seeing that makes it obvious why cable companies would support this new rule.

Boxee put together a presentation to the FCC that argues against the proposed rule as it would hurt them and any other startup wanting to innovate in the field of television. Their main argument is that encryption would harm competition and require everybody to subscribe to cable companies for even basic tier cable.

Boxee also brings up the good point that encryption would render TV tuners useless, which are used by many PCs and HDTVs to stream over-the-air unencrypted local cable.

It’s strange to see the FCC even contemplating a rule like this as they are one of the few government agencies that seems like they’re on the side of the consumer since they were the group who proposed net neutrality rules.

They could make a decision on the new rule within the next few weeks. Boxee encourages their users to contact the FCC on their behalf to stop this proposed law from taking effect.